The key change is the 4 per cent cap on interest rates, including late-payment interest. This will start to be rolled out as early as July by the Law Ministry and could shake up a sector allowed to charge up to 40 per cent a month.

The limits are aimed at giving borrowers more protection, especially once the Monetary Authority of Singapore's new lending rule kicks in on Monday. Licensed moneylenders expect a borrowing surge once thousands of indebted individuals face suspension of their credit facilities by banks.

Moneylenders did have some cheer as their proposals - of being allowed to charge an administrative fee of not more than 10 per cent of the loan amount and a fixed late fee of not more than $60 a month - were accepted.

Law and Foreign Affairs Minister K. Shanmugam said yesterday: "We set up this committee to come up with recommendations that would help protect the consumer, the borrower. But, at the same time, if you kill off the moneylending industry, then the people who need to borrow won't get access."

It rejected a proposal to lift curbs on advertising as it felt this could lead to more borrowing.

"Unrestrained advertising does have an impact on consumer behaviour and encourages borrowing... We noticed a shift in pattern when we allowed advertising, and when we shut off advertising, there was a drop," said Mr Shanmugam. "So our approach is to try and see how we can structure it such that those who really need will go and find a way to borrow, but we don't want to induce demand through advertising."The 15-member panel was set up last June to review regulations for the industry and recommend improvements, after complaints of excessive borrowing and exorbitant interest rates.

Its other recommendations include capping total borrowing costs at 100 per cent of the principal sum of the loan and capping borrowing at six times the monthly salary of borrowers.

A Moneylenders Credit Bureau will be set up to offer a central repository of information on people using moneylenders. Borrowers excluded from local casinos will be flagged to moneylenders via the bureau.

The panel also proposed standardised loan terms and practices for moneylenders. These will require repayments to be aligned to a borrower's wage cycle set on a monthly basis, and interest to be calculated on a reducing basis.

About 30 moneylenders attended a briefing on the proposed recommendations yesterday.

Moneylenders' Association of Singapore president David Poh said: "Most of them found the proposals to be fair and acceptable."

Credit Counselling Singapore president Kuo How Nam felt the gap between the new credit rules taking effect and the implementation of the proposal to control borrowing costs could be seen as an opportunist period for moneylenders. He warned against lending to high-risk borrowers with loans of over 24 times monthly pay.

"They're basically up to their eyeballs in debt. If moneylenders want to lend to these borrowers, it's really a case of seller beware," said Mr Kuo.